ASIC helps Australian consumers understand new credit laws

However, ASIC also states that the law regarding "substantial hardship" will become clearer as cases come up before the courts and judgments are handed down. So from what I can gather, I would assume lenders would already have these benchmarks in place and it's business as usual, but ASIC is also saying to them watch this space, as things might change??.

regulations were. However, ASIC states on it's website that in Phase 2, Part 2
The big unknown relates to meeting "the additional regulations prescribed" by the government, which from what I've gathered have not been defined as yet, and once implemented may (or may not) change things significantly for the investor.

Ralf> I couldn't find within the legislation any mention of consistent savings being classified as a fixed expenditure? Given the Act was 516 pages long, I may have just missed it?

Anyway, I would be interested to get feedback from all you brokers out there as to whether I have interpreted the new Act right, or if I have missed anything. Also note, I've came at this from an investor's perspective, rather than from a broker's perspective, so have not mentioned the onerous burden on brokers to now prove that they have conducted "responsible lending".


as investors lisa its not business as usual for u and i as everybody is interpreting those 516 pages differently because it is so vague and yet to be tested by the courts, As tokenfunder said ASIC want a scalp and no-one wants to be that scalp so everyone is being cautious and so many things are just ridiculous. Like that example Rolf used of consistent savings being counted as an expense or having to predict children within a period of time, or what foxtel package etc, just crazy stuff.

so yes lenders and brokers had policies in place that worked but because of this crazy legislation it is not business as usual, until the legislation is tested all borrowers suffer including you on your investment journey, another Innocent victim of political grandstanding, making it harder to buy appreciating assets but if u want to buy a few hundred grand of furniture and cars on expensive credit go for your life, no protection there.

it's a bit like the justice system where u r considered innocent until proven guilty, lending was like that, now borrowers are considered guilty unless proven innocent, that burden of proof is painful
 
as investors lisa its not business as usual for u and i as everybody is interpreting those 516 pages differently because it is so vague and yet to be tested by the courts, As tokenfunder said ASIC want a scalp and no-one wants to be that scalp so everyone is being cautious and so many things are just ridiculous. Like that example Rolf used of consistent savings being counted as an expense or having to predict children within a period of time, or what foxtel package etc, just crazy stuff.

so yes lenders and brokers had policies in place that worked but because of this crazy legislation it is not business as usual, until the legislation is tested all borrowers suffer including you on your investment journey, another Innocent victim of political grandstanding, making it harder to buy appreciating assets but if u want to buy a few hundred grand of furniture and cars on expensive credit go for your life, no protection there.

it's a bit like the justice system where u r considered innocent until proven guilty, lending was like that, now borrowers are considered guilty unless proven innocent, that burden of proof is painful

OK, I'm glad I wasn't the only one to find this legislation a bit vague - and from what you are saying it may in fact be the lack of clarity surrounding the legislation that will scare brokers and lenders into unnessecarily tightening their lending criteria, not the actual legislation itself.

However, I still have not been able to locate within the legislation anywhere where it states that the broker/lender must classify savings as an expense, check foxtel bills, or predict whether the client will be having children later down the track.

I located within one of ASIC's recent regulatory guides "Credit Licensing: Responsible lending conduct" June 2010, a list of "reasonable" things that it is "suggested" brokers/lenders look into when inquiring about the client's financial situation, including:

(a) the consumer’s current amount and source of income or benefits (this would include the nature and length of their employment—e.g. full-time, part-time, casual or self-employed);
(b) the extent of the consumer’s fixed expenses (such as rent, repayment of existing debts, child support and recurring expenses such as insurance);
(c) the consumer’s variable expenses (and drivers of variable expenses such as dependants and any particular or unusual circumstances);
(d) the extent to which any existing debts are to be repaid from the credit advanced;
(e) the consumer’s credit history;
(f) the consumer’s circumstances, including their age (particularly where they may be a minor) and the number of dependants;
(g) the consumer’s assets, including their nature and value
(h) any significant changes to the consumer’s financial circumstances that are reasonably foreseeable (such as a change in repayments for an existing home loan due to the ending of a ‘honeymoon’ interest rate period, or changes to the consumer’s employment arrangements such as seasonal employment or impending retirement); and
(i) geographical factors, such as remoteness, which may require consideration of specific issues (such as potentially higher living costs compared to urban areas).

However, there is nothing to suggest the broker/lender needs to check a client's foxtel account (unless this could refer to point [c] regarding variable expenses?), predict whether they are having a baby (point [f] maybe?), or classify savings as an expense? For my own investing future, I hope common sense prevails with regards to the future interpretation and evolution of this new legislation.
 
Im currently in the US.

People here looking to get credit - appears about 10% of applications are approved, which is shocking as compared to Oz. All of the property transactions which are happening are at cash only, with a few out of the courthouse at the 2x a week auction for foreclosures (quite literally). Courthouse stuff is settle in 24 hours cash with 10% cash deposit down on the day. We just saw a 1.25M property sell for @125k.

One question banks here now ask you is do you have kids? Yes. Do you have plans for any more? If no, please provide evidence of your vas.

The US coming out of things (IMO) isnt going to be any time soon. Its actually interesting as people who told me a year ago they were going to stay here are now serioulsy considering moving to oz.

as i mentioned a while ago - banks and the govt want you working, paying taxes, and subservient as theres debts to pay off.
 
how will this effect
caveat lending
or the high bridge lending were you have no idea how it is going to effect the borrower
yes they may not be able to pay it back thats why the interest is so high
anyones idea here
 
Spoke to a major provider of such funding in Sydney only the other day and they have removed all of their nodoc or lodoc style advertising and were sitting there waiting for the phone to ring.

Really hard to see how charging 6% per month you could comply with the NCCP requirements on suitability.
 
Hi Lisa

What the ACT says, and what it means, and how its interpreted will be different to every lender, every adjudicator, and every PI insurance provider, UNTIL there is some case law and precedent.

This is where the real danger lies, for a broker at least.

See, if a bank employee gets a slap and loses their job, they have lost a job. A well established broker wont jeopardise their "bust a gut for a decade" business for a clients' interpretation of what is reasonable at law, where reasonable is not quantified.

Again today I had to turn away 2 good loans, simply because I could not be confident that we could comply with the forward looking rule.............one of the clients repayment history of large unsecured debt was imeccable, as was their work history and prognosis but we could not find the savings in their actual vs predictive budget to make the loan work, even though MUM and DAD where gifting them 10 %. I had to say go and see the BWA branch manager......................Im not allowed to help you.

In 10 + years I have become a reasonable judge of what type of client and deal mix is a good risk, perhaps better than most credit assessors, with the delinquincy rate of the portfolio being less than 10 % of the average. But as is the case with a " good investor" making a case and gut feel arent relevant in an era where black box technology overtakes personal responseability.

The responsible lending considerations are only ONE thing of a half things that are of concern.

If we survive as a business we may come out stronger, but I dont know about smarter............

ta
rolf
 
Hi Lisa

What the ACT says, and what it means, and how its interpreted will be different to every lender, every adjudicator, and every PI insurance provider, UNTIL there is some case law and precedent.

This is where the real danger lies, for a broker at least.

See, if a bank employee gets a slap and loses their job, they have lost a job. A well established broker wont jeopardise their "bust a gut for a decade" business for a clients' interpretation of what is reasonable at law, where reasonable is not quantified.

Again today I had to turn away 2 good loans, simply because I could not be confident that we could comply with the forward looking rule.............one of the clients repayment history of large unsecured debt was imeccable, as was their work history and prognosis but we could not find the savings in their actual vs predictive budget to make the loan work, even though MUM and DAD where gifting them 10 %. I had to say go and see the BWA branch manager......................Im not allowed to help you.

In 10 + years I have become a reasonable judge of what type of client and deal mix is a good risk, perhaps better than most credit assessors, with the delinquincy rate of the portfolio being less than 10 % of the average. But as is the case with a " good investor" making a case and gut feel arent relevant in an era where black box technology overtakes personal responseability.

The responsible lending considerations are only ONE thing of a half things that are of concern.

If we survive as a business we may come out stronger, but I dont know about smarter............

ta
rolf

Good example of how a broker should be operating in the New World, Rolf.

The challenge for all (both bank staff and certain newish brokers) will be to understand that the old days of "let's look at how much a given bank's serviceability calculator will allow you do borrow" are on the way out and the old school approach of "how much can you afford based on your own circumstances" will need to be the starting point.
 
hi Qlds007
yes but remember that hte 5 and 6% per month was an industry and a large one at that
I have no idea how it will comply
because it was unregulated before and so was built that way.
interesting times
a very large component of the 5 and 6% per month market was legal firms
the shingles have already come down on alot of these groups or funds
people may not like that market but from my looking at it there is no form that would allow them to work within these guide lines.
 
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